Big Four pull trigger on Initial Coin Offerings advisory services

23 April 2018 3 min. read

Responding to client demand, the Big Four consulting firms are finally pulling the trigger on years of accumulated digital currency expertise. However, mindful of the shifting regulatory landscape, they continue to employ characteristic caution as clients seek advice on Initial Coin Offerings.

The huge earning potential harboured in Initial Coin Offerings (ICOs) is no longer a trade secret. But confusion reigns as firms scramble to pinpoint the financial risks and regulatory pitfalls associated with the highly speculative world of digital currency. Top consultancies report that clients are making daily requests for advice on entering the ICO market. EY, PwC, Deloitte and KPMG are now carefully responding to client demand.

ICOs are an online crowd funding mechanism which sees companies furnish investors with tokens in exchange for traditional tender or established crypto-currencies. If the firm’s fundraising goals are met and their project succeeds, the tokens gain instant value. Startups have been the main beneficiaries of this bustling hive of fundraising activity. Billions of dollars-worth of investment have been funnelled to new companies in a mind-boggling range of currencies.

Consultants taking prudent approach to ICO advisory services

Press speculation over a ‘Bitcoin bubble’ and the sheer numbers involved — the value of the global ICO market has now broken the $4 billion mark — has necessitated regulatory involvement. China and South Korea were the fastest to act, issuing a blanket ban on ICOs late last year. In April 2018 a Russian court banned cloud-based messaging app Telegram as part of a wider crackdown on ICO activity.

As a result there is a huge demand for advisors who can help companies navigate the murky regulatory waters and engage in serious project fundraising without being caught on the wrong side of the law. Clients also want their consultants to advise on the sustainability of ICOs in western countries and guide them through the crypto-currency maze.

Easy does it

Curbing their enthusiasm is the fact that the Big Four have reputations to uphold, reputations that would take a serious beating if a client found themselves in a legal and financial mess after taking their advice.

“We’ve been watching it evolve over time and are constantly figuring out what role we can and should play,” said Jeffrey Grabow, venture capital lead at EY, of the ICO marketplace. EY hasn’t disclosed the names of clients requesting ICO advisory services but has indicated that such requests are now commonplace.

At KPMG and PwC specialist Blockchain departments are well-established but consultants are only just beginning to pull the trigger on years of accrued expertise. PwC is not acting on any ICO business in the US until it has developed a ‘comprehensive framework’ for clients, said Blockchain lead Grainne McNamara. KPMG has been less hesitant, admitting to accepting US clients in the latter half of 2017.

McNamara’s counterpart at Deloitte Consulting — Eric Piscini — said the Big Four firm was taking a ‘wait-and-see’ approach to ICOs. Deloitte did, however, provide substantial legal advice to Playkey founder Egor Gurjev who used an ICO to raise funds for the cloud-gaming startup. He raised more than $10 million and, as a result, Deloitte found itself a central player in the first major merger of cloud-gaming and Blockchain technology.